UK Defence Secretary Des Browne has said in Baghdad that the UK commitment to Iraq remains "absolute".
Mr Browne arrived in Basra on Wednesday
But he said at a press conference in the Iraqi capital that the nature of that commitment was changing, with more focus on economic development.
Mr Browne flew into the southern city of Basra, where UK troops are based, on Wednesday during his visit to Iraq.
The 4,000 UK troops there provide support to Iraqi forces, who have taken over responsibility for security.
Last October the prime minister said the intention was to reduce the number of UK troops to 2,500, starting in the spring, subject to military guidance.
Mr Browne said he was still awaiting that advice and would announce any plans to Parliament first.
In the meantime the number of Iraqi troops who have been going into southern Iraq has "increased quite significantly, as has the Iraqi army," he told reporters.
"We have accepted the responsibility to mentor and train those troops. We will continue to do that - that is our responsibility and that is part of our contribution to the future security of the Iraqi people," he said.
He described the economic and developmental potential of southern Iraq as "almost limitless".
It was an economic imperative to develop the oil resources and the infrastructure, he said.
He also said the southern Iraqi port of Umm Qasr, across the border from Kuwait, should in time operate to the highest international standards and praised the provision already being offered at Basra International Airport.
He did concede that improved security would be needed in order to protect any new investment from corrupt behaviour.
In December, an MPs' report suggested that Basra was dominated by militias and the police contained corrupt elements.
Asked about the current levels of violence in Basra, Mr Browne said: "I don't deny there are continuing problems in Basra."
He said he stood by the decision to allow Iraqi security forces to address the problems under their own leadership.
"The evidence of my own eyes over the last couple of days, and of my constant monitoring, albeit that there is violence in the city, suggests to me that that will be the resolution.
"I am convinced that in the months to come we will see the benefits of that decision, and significant progress and improving security in Basra."
On Monday the Commons defence select committee said the cost of military operations in Afghanistan and Iraq this year was likely to rise 94% to £3.297bn.
This included a 72% rise in spending on Iraq to £1.648bn, despite falls in troop numbers. The government says the money is needed for force protection.